tv [untitled] May 4, 2011 8:30pm-9:00pm PDT
think of many fiscal feasibility projects that have come before the board. supervisor chu: supervisor mirkarimi: jig -- supervisor mirkarimi: and i was going to set way, but i wanted to make sure that the creative nature of this before us is grounded on the idea of certain variables having to line up. that alignment requires the kind of perfect scenario that helps to give the cruise terminal its next step into reality. >> because of fiscal feasibility is called for prior to signing the application at the planning department, these projects by an early inception -- i did look at some fiscal reviews in which, 2007, the transportation feasibility of
the port ranged from $180 million to $3 million, allocated to each project segment, timing at that time were not established. a flavor of how the agency would fund the project, but show, yes, in fact, it had reason for further environmental review. on the port side, the exploratory and project came here in 2008 on peer's 15, 17, and $97 million project. the primary funding source was pledges. at that time, they had $53 million of cash on hand. so definitely quite a long way. that project is moving ahead successfully, at this point. so i do not think it is unusual,
prior to filing an application with ceqa, at a major project would not have all funds identified. supervisor chu: supervisor mirkarimi brings up a good point about the financial feasibility part. >> i cannot remember the year. maybe 2003, 2002. supervisor mirkarimi: why, in the regular framework, does this go into the eir for the america's cup, and not its own? why is it not umbrellaed under everything else? >> the america's cup did have a look up the scope feasibility. given the cost and size of the project, we need to bring it to you separately. a reason for fiscal feasibility
is for the board to look at overall financing plan. before a city department expense major efforts on an eir, that there is a reasonable plan of finance. supervisor mirkarimi: contingencies of what that made of light, in case some of the others are anticipated, hoped for? >> obviously, phase two has many unknowns at this point. key at issue is voter preview of the bond. -- approval of the bond. we are dedicated to delivering the park plaza, but if the voters do not choose to approve that, we would have to look for another funding for it -- source for the park improvements. that does not mean that we could not necessarily deliver a functioning cruise terminal. other charges related to operator charges are well- established in other ports.
i think we can set them up, we need to work with the cruise industry on the size of those things, but typically used. the other ideas -- revenue generation, a finding grant sources. we have been successful in finding grants for security. we're looking to get funded for the green components of the project. worst-case scenario, we delayed these days to improvements and our functioning cruise terminal. -- we delay the phase two improvements and our functioning cruise terminal. supervisor chu: thank you. supervisor kim? supervisor kim: my first question is for the budget analyst. you mentioned the port's outstanding debt would increase
by approximately 51%. one of the things that we are asked to consider is the debt load. is there any kind of basis for what is recommended for debt load, depending on the budget? >> as you know, the port is not a general fund department. when they issue debt, they have to have revenues which are sufficient to pay that debt. then they go through a variety of procedures before any kind of a bond issue can be issued, to make certain that that debt can be fully paid by port revenues. we also point out on page 10 of
the report, the board has assured the rating agency that the port plans to keep their everett debt service coverage of total revenues and total average cost above two. so there is that requirement. the port currently estimates their annual debt service ratio is at least 3.32, such that there is room for additional debt. so that is one of the procedures they go through to make sure any new issuance of bonds can be fully paid by port revenues and still allow the port to operate with our other expenditures. supervisor kim: maybe this is a question for ms. forbes. the current debt service ratio is 3.32, there is additional room. how high can the ratio go?
>> through the chair, we have recently looked at our debt capacity. the executive director and her staff have taken pains to grow our capacity, to the point where we can issue in 2010. we have capacity for about $40 million in new debt and maintain the coverage ratio that mr. rose indicated. this new debt issuance of 15.5 -- $500,000 is interest earning. that does not include issuance costs. $16 million is well within our capacity at this time supervisor kim. supervisor kim: phase 1 funding, part of this is due to a bond that is going to the vote next
year? >> it would be going to the port, which is then subject to board approval. phase 2 for the public plaza, that includes the bond. supervisor kim: net $9 million could find a potential water park. even if that bond failed, we would still have an $11 million shortfall. >> yes, that is correct. supervisor kim: you have just mentioned what we would propose to not develop, not construct if we were not able to fill the $11 billion gap. could you talk more about what that would look like for pier 27? >> the first thing we would do is look to defer some of the maritime improvement.
so we would have a functioning cruise terminal that it may not include the mobile gang way, some of the other improvements and a passenger loading and offloading edition. so it would be a working cruise terminal, but not an exceptional one. that would be the first thing we would look to. to get us to the point where are now, to fund phase one, we reduced the size of the building. we used to have a shortfall of $21 million over all. we would look again to see if we can do some value engineering that would still allow us to have a superior product. that is what we went to first. then we would look to waiting, allowing more capital surplus out of the budget. there could potentially be project delays, if we were not
able to secure the sources. supervisor kim: have you priced out exactly what you could not construct based on the shortfall, and still allow it to be a workable terminal? >> we have not. supervisor kim: i just got your memo this morning, so i did not get a chance to read all of it. i know that you talked about 8064. i know that this is the bill that is going to the future of the america's cup. i understand this is going to phase 2, the cruise terminal, so this bill would not be used for construction. >> special projects manager with the port.
if i could give a brief overview, for the benefit of the public. the city is undertaking a great deal of capital expense to prepare for the america's cup. $58 million in phase 1. the event authority is investigating. those will be reimbursed by rent credits that the port will give to future long-term development grants. in total, the city will spend about $113 million getting ready for the america's cup. there are certain tax benefits that flow to the city that have been quantified at $19 million to $23 million. the state is likely to receive even greater tax benefits, on the order of $61 million, from
the america's cup. and they are not investing in any of the improvements to prepare for the america's cup. so basically we have a case of misaligned benefits and cost. when we are proposing here is, out of future development from these america's cup sites, the city could capture shawsome of t share to fund their time projects. essentially, payback phase 1 investment or go to phase 2. we do not expect this to occur for another 10 years. all of those would be subject to board supervisor approval, along with the developments. we are also early in the legislative process.
we have a long way to go in sacramento. supervisor kim: 7 to 10 years, so this could go back to paying the debt in phase one, but we would not really see an impact in the construction? so we are really just talking about repayment of debt, but does not cover the shortfall . >> if the bill passes and we have the ability to capture a share, we would be in a stronger position to offer a bridge of financing to cover the phase 2 shortfall, knowing that we had a secure source to repay it. supervisor kim: what is the estimated time line, some level of certainty from sacramento, potential passage of the bill? >> it would typically go to the governor's desk in october.
i think that we would have a much clearer signal from the legislative process before then. potentially, august or september. supervisor kim: a couple of things. i feel uncomfortable improving -- approving the fiscal feasibility of the project as is. i would like to see a terminal plan -- a plan that does not include the $11 million, if that was the worst case scenario -- to feel comfortable approving. i have some personal opinions around a water park and being part of a g.o. bond as part of park and representative. our parks are drastically underfunded.
to allocate $9 million of that to a waterfront park seems to me a bit ambitious at this time. i am not quite sure if it would serve many of the families that currently have a lot of needs with the current parks situation. we need lights, park improvements, better rec centers. so i have a couple of questions about the plan over all. so i do not feel comfortable supporting this proposal, as it is. i am not sure if we can get a plan that excludes what a working terminal would look like without the $11 million shortfall. if we had that, i would feel comfortable supporting the proposal. supervisor chu: thank you. why don't we go to public comment on this item. is there anyone from the public that would like to comment on this item? item 4. seeing none, public comment is closed.
given the questions that we have seen from this item. i know both supervisor mirkarimi and supervisor kim had outstanding questions about it. if i could suggest the committee send this forward without recommendations at this time, and perhaps we can follow up with members of the committee and others to address those concerns. supervisor kim: at this time, i do not feel comfortable boarding with recommendations, so i would be voting no. supervisor mirkarimi: just one preface to that. i agree a lot with what supervisor kim had inquired about. i would be more than happy to push this forward, but i will reserve open consideration about what some of my reservations are that are in line with what supervisor kim's are, too. supervisor chu: thank you.
then the articulate why i think it is important to move this item forward. the requirement we put together, and the fiscal feasibility study, was a reason requirement that is very good and insightful, thinking about how we move forward with projects, thinking about long-term funding sources for things. it is also something that is absolutely necessary to move forward, if we want to move forward with the eir for the america's cup. given a timeframe, it is important that we keep that schedule. the thing that gives me comfort is the fact that the fiscal feasibility study simply shows a road map as to how the department is thinking about funding the gap, solving the budget solution. there is nothing in this resolution that ties us to those allocations, and of course, is dependent on many things. i think the department has put forward a number of reasonable
ways in which to meet the $12 million gap in the future. of course, we know there is some uncertainty with regard to issuance to a 2012 rec/park bond. i know the plan is not perfect, but we have moved forward with other projects, simply by saying here is a road map, intended to pursue. will things change between now and 2014? i expect they will, and we may find the revenue sources that could change this picture. because of the importance of moving this item forward, even to publish a draft ceqa study for the america's cup, it is important to move this forward. so i will be supporting the motion to send this forward to the full bore without recommendations, at this time, simply to allow the process to continue. supervisor kim: will this be forwarded to the following tuesday? is that enough time to respond
to some of the questions? is it possible to get another week? >> through the chair, that will give us ample time to provide explanations and provide answers to your questions. supervisor chu: thank you. let us take a role, now on sending this item forward without recommendations. >> [roll call] the motion passes. supervisor chu: thank you. item five please. >> item 5. ordinance amending the san francisco administrative code, section 6.22, public work construction contract terms and working conditions, by amending subsection 6.22(e)(8) to further delineate due process procedures for administrative hearings on appeals by public work contractors and/or subcontractors from a certification of forfeiture made by the city's labor
standards enforcement officer or responsible department head for non-compliance with prevailing wage requirements; and to additionally conform distribution of forfeiture provisions to state law. supervisor chu: thank you. we have the comptroller's office for this item. >> good morning. the comptroller's office is the hearing entity for any appeal that comes before the city related to the office of labor standards enforcement of penalties and their findings that wages have not been paid in accordance to the city's requirements. we have been acting as the appeals office for a number of years and have noted, in some instances, there are delays within the hearing process that we believe these amendments will expedite. first, the amendment before you proposes that a meet and confer
process be implemented prior to a fair hearing being conducted. that is what happens in some of the instances. what this amendment does is it would require that meet and confer be afforded to both parties prior to any appeal. it also allows the controller to appoint a hearing officer from both outside administrative officers as well as administrative law judges currently employed by the rent board. we use those administrative law judges and other non- construction appeals that come before us. we find that is more efficient because they are available, cheaper, and they have the skills and training necessary to act on these cases. we believe that will enhance the efficiency of the hearing process. lastly, the city attorney has
made a few non-substantive amendments that has allowed the administrative code to comply with the current rules of regulation in state law and so forth. we do believe this amendment before you will expedite the hearing process. right now, both the city attorney and office of labor standards does everything they can to keep the process going, but we believe we can make minor improvements. supervisor chu: thank you. i do not believe we have a budget analyst report on this item. if we do not have any questions, i would like to go to public comment. is there anyone from the public that would like to comment on this item? are you coming forward, mike, for item 5? >> san francisco building and
trade council. i have no objection to the amendment as a whole, but i do object to two points. if you go to page 10, 622 e8c, inclusion of an administrative law judge, someone with experience in construction law, both are problematic to me. if any of you had had any conversation with me, you know it is not an easy matter to understand what they do. i do not believe it is sufficient to bring someone in who does not have any experience of that to consider our work and how prevailing wages should be determined in specific instances. so an administrative law judge, while cheaper in the short term, is not necessarily more
efficient. the quality of your decision will not necessarily be as good. also, someone with experience in construction law, at first glance, may seem like someone ready to answer these questions, but construction law deals with contract matters before the work is performed, after the work is performed, matters of payment, construction defects. someone with construction law experience will also not understand what we do. it really requires someone with experience and knowledge of our trade and how they function. so i would ask that those two revisions be stricken. supervisor chu: thank you. are there any other members of the public that the bike to speak? seeing none, public comment is closed. i do think that there is language in here that is not just alj.
given the combination of expertise that is indicated here, i believe it would cover the issues that would arise. do we have a motion for this item? supervisor mirkarimi: motion to accept. supervisor chu: motion, 2nd. without objection. could you call items 6 and 7. >> item 6. ordinance amending article 12-a of the san francisco business and tax regulations code by adding section 906.4 to establish a payroll expense tax exclusion for that portion of an eligible person's payroll expense that is attributable to stock compensation. item 7. ordinance amending the san francisco business and tax regulations code, article 12-a, by adding section 906.5 to establish a payroll expense tax exclusion for stock-based compensation and amending section 902.1 to exclude stock options from the definition of
payroll expense. supervisor chu: thank you very much. these two items are brought to us by a number of individuals, primarily supervisor mirkarimi and supervisor farrell. from my understanding, supervisor farrell has introduced substitute legislation as of yesterday. he has asked that his item, item seven, b continue to the call of the chair to allow the budget analyst to report those changes. we could take that motion later on so that we could allow for public comment, but that is the intention. there will me -- there will not be a presentation on items seven today. supervisor mirkarimi? supervisor mirkarimi: thank you. what is before you is our response to something that came up in a profound way, asking san
francisco to do what it can to help provide and retain twitter. this was before us a blittle longer than one month ago. during those deliberations, i said i would like us to try to furnish policy that speaks to a whole host of companies that we anticipated that would also request and require a similar consideration, as it had been applied to one company. this is not something new that came to our attention, city hall's attention, as it seemed to spike during the deliberations, but this is something that we have known about for years, tech companies
that are pre-ipo, that aspired to be public, that would like to see as much assistance as they possibly could so that they can stay, grow, and prosper in san francisco. in return, san francisco city hall, by doing so, from those companies. san francisco is the only city in california that levies a payroll tax. one of the few in the nation to tax stock options. this legislation we are putting forth today, co-sponsored by president david chiu and supervisors david campos and eric mar, helps retain companies who are undertaking an ipo status in san francisco while the city studies its overall business tax code.
that review is underway and will be furthered through this legislation. meanwhile, the comptroller's office, through a report published by our economist, finds future tax liability associated with stock options appears to be a significant incentive for successful companies to locate outside the city. a solution is a specific stock option exclusion for a discrete period of time, which is why we have always decided to pursue this process of looking for that discreet population so that we can understand what its impact our and be able to measure a more proper cage in making sure our general fund is not adversely affected. more to the point, how we can actually benefit exponentially fr